Tags: Unemployment | Rate | Drops

Unemployment Rate Drops

Friday, 07 April 2006 12:00 AM

Yesterday Money News reported that The Wall Street Journal was predicting a March jobs number of around 180,000.

Luckily for American workers and the Bush administration, The Journal was off by about 30,000 jobs as the U.S. Labor Department says that the economy added 211,000 jobs in March. In addition, the U.S. unemployment rate fell to 4.7%.

Like The Journal, most analysts had anticipated between 180,000 and 190,000 new jobs for the month. Most also expected the unemployment rate to remain at 4.8%.

The Labor Department also implemented a downward revision for new hiring in February to 225,000 jobs instead of the 243,000 the department had initially announced. It was the same thing for January, when new jobs totaled 154,000 instead of 170,000.

Wages were up for March, but not as high as analysts had predicted. For the month, wage growth rose 0.2% to $16.49 - down from the 0.3% that was anticipated.

Despite the inevitable inflation worries that bubble up every time a good jobs number comes out, the stock market should rally on the unemployment news this morning.

Stock futures rose higher in early trading after the jobs number was released.

Yesterday we told you that gold futures had reached a fresh 25-year high of $600 an ounce.

While the news cheered longtime precious-metal investors, should new buyers jump into the gold market?

CNN Money cautions: "As gold futures surged past the $600-an-ounce barrier Thursday, it was easy for investors to forget that in 1999 gold was stuck around an anemic $250 an ounce. But with oil shortages and inflation fears making headlines again, the commodity has staged a full-blown return to glory, earning outlandish returns for precious-metals investors."

The news service notes that Nymex gold futures have jumped 38% over the past year and are up a red-hot 126% since 2001.

That's good news for those investors who got into gold five years ago - but it might not be go great for newer speculators who want in now.

"The first crucial question is whether the jump to $600 was a temporary boost or a level that's here to stay," says CNN Money.

In other words, is $600 a floor or a ceiling for gold? CNN Money admits that inflation and dollar fears certainly leave some room for gold to go even higher.

"The recent bout of high oil prices has made investors worry that it will push up prices on all kinds of goods and services, eating away the purchasing power of the dollar. Gold is one of the rare investments that maintains its value during periods of inflation," says the news service.

Other analysts agree that gold's bull market could have more room to move.

"So long as there's the threat of higher energy prices and the dollar remains low, metals could rise even higher," says Jim Quinn, commodity floor analyst with A.G. Edwards. "From a technical perspective, the market could certainly exceed $600."

CNNMoney says that if you want to get into gold, the easiest way may be through one of two exchange-traded funds - Barclay's iShares COMEX Gold Trust and SSGA's streetTracks Gold ETF. The former is trading at $59.37 while the latter is at $59.28.

"Both have made gains in the double digits over the past year and are subject to the same forces that drive the daily gold futures market," says CNN.

Standard mutual funds may be an option, but note that most invest in gold-mining and gold-equipment companies and not as much in gold itself, as the two ETFs do.

Whatever investors do, make sure you can accommodate the wild price swings that gold markets seem to invite.

Says Karen Wallace, a fund analyst at Morningstar: "There are other ways to hedge inflation - gold can be extremely volatile. Real estate investment trusts (REITs) are another investment option that has a low correlation to the stock market. But it all really depends on what somebody's portfolio looks like."

In other words, if you can lose 40% of your gold portfolio in a single year and still sleep comfortably at night, then, by all means, step up to the plate and swing away.

Stock pickers live for moments like these … when governments roll out programs that guarantee decades of higher spending that should benefit a given industry.

In this case, it's the state of Massachusetts, and the "given industry" is health care.

On Tuesday, the state's legislature passed a groundbreaking bill that would both require state residents to obtain health insurance and levy a fee on employers that do not cover their workers. Previously, no state has required people to carry medical insurance.

The bill awaits a signature from Gov. Mitt Romney (R), who has line-item veto power. Romney's spokeswoman, Corbie Kiernan, says, "All expectations are good for him signing it," although he's carefully scrutinizing a provision that would charge businesses $295 per employee if they don't offer health benefits.

"There is a new element of employer and individual responsibility," Kiernan remarks. "The main [goal] was to cover the uninsured in Massachusetts and reduce the cost of health care." About 550,000 Massachusetts residents are uninsured, she estimates.

Under the legislation, low-income residents would have access to state-subsidized insurance policies. Residents who don't have coverage will lose their state income tax deduction and could face an annual fee.

The New York Times reports that the program "will cost $1.2 billion over the three years, but only $125 million of that will be new state money." The remainder will come from federal money and existing state funds. Lawmakers say that no new state money will be needed after the first three years.

That should open the door to some opportunities for investors in New England health care companies. Imagine you're Blue Cross or Aetna and you have 550,000 new customers knocking at your door.

If the Massachusetts model works - or is even perceived to work - other states will surely follow with similar "good government" initiatives. And that should benefit health care groups even more.


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Yesterday Money News reported that The Wall Street Journal was predicting a March jobs number of around 180,000. Luckily for American workers and the Bush administration, The Journal was off by about 30,000 jobs as the U.S. Labor Department says that the economy added...
Friday, 07 April 2006 12:00 AM
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